This comprehensive summary distills the key information from FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC.'s (FREIT) latest 10-K filing, providing a transparent overview for investors.

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. (FREIT): A Closer Look at Their Annual Report

Considering an investment in FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. (FREIT, trading as FREVS on the OTCPK market)? This guide thoroughly examines their annual report for the fiscal year ended October 31, 2025. We highlight crucial details and offer a clearer picture to inform your investment decisions.

1. Business Overview

FREIT operates as a Real Estate Investment Trust (REIT), owning and managing a portfolio of real estate properties primarily located in New Jersey and New York. As a REIT, FREIT aims to generate income from rent and increase property values. It benefits from certain tax advantages by distributing at least 90% of its taxable income to shareholders, thereby avoiding corporate income tax. In July 2021, FREIT transitioned from a New Jersey Business Trust to a Maryland corporation, a structural change that did not alter its core business operations.

As of October 31, 2025, FREIT's portfolio includes:

• Residential properties: Six apartment complexes with a total of 792 units, plus a 65% ownership stake in another 266-unit apartment complex (Pierre Towers).
• Commercial properties: Five commercial buildings offering approximately 589,000 square feet of space.
• Undeveloped land: Three parcels totaling about 7.37 acres.

2. Financial Performance

The report highlights positive debt management actions:

• Debt Service Savings: A $5.7 million paydown on the Westwood Plaza shopping center loan is expected to save FREIT approximately $705,000 annually in debt payments, directly boosting future cash flow.
• Cash Inflow: FREIT also received a refund of about $704,983 from an escrow account tied to the Westwood Plaza loan, providing an immediate cash injection.

As of April 30, 2025, FREIT's total market capitalization—the value of common stock held by regular investors—stood at approximately $100.1 million.

3. Risk Factors

The most immediate and significant risk FREIT faces is the unresolved $25 million loan for the Preakness Shopping Center. Failure to secure a favorable extension or refinancing could lead to default, asset forfeiture, or forced sale, severely impacting the company's financial position and stock value. While FREIT has secured short extensions, a final agreement for modification or extension remains under negotiation, and there is no guarantee of a favorable resolution.

Other critical risks for FREIT include:

• Interest Rate Sensitivity: As a real estate company with significant debt, rising interest rates could increase borrowing costs for new acquisitions or refinancing existing debt, impacting profitability.
• Economic Conditions: A downturn in the New Jersey and New York economies could reduce demand for residential and commercial space, leading to lower occupancy rates, decreased rental income, and property value depreciation.
• Competition: Intense competition from other landlords in their target markets could pressure rental rates and occupancy.
• Capital Availability: The ability to access capital for acquisitions, development, and refinancing is crucial. Tight credit markets could hinder growth and increase financial strain.
• Maintaining REIT Status: Failure to meet the strict IRS requirements for REITs (e.g., distributing 90% of taxable income) would result in the company being subject to corporate income tax, significantly reducing distributable cash flow.
• Property Valuation Risk: Real estate values can fluctuate, and a decline could impact the company's asset base and borrowing capacity.
• Conflicts of Interest: FREIT's executive officers are not exclusively dedicated to the company and can pursue other business activities. Additionally, Hekemian & Co., FREIT's managing agent, is not obligated to offer potential acquisition properties exclusively to FREIT. This arrangement creates potential conflicts of interest: attractive investment opportunities identified by the managing agent might be pursued for their own benefit rather than FREIT's, potentially limiting FREIT's growth.

4. Management Discussion and Analysis (MD&A Highlights)

The MD&A provides management's perspective on the company's financial condition and results of operations. For Fiscal Year 2025, management's key activities included:

• Successful Loan Management: FREIT successfully extended the Westwood Plaza shopping center loan to May 2026. A significant $5.7 million principal paydown reduced the balance to $10 million at an 8.5% fixed interest rate. This action resulted in substantial monthly payment reductions, generating annual savings of $705,000.
• Improved Liquidity: The company received a $704,983 refund from an escrow account related to the Westwood Plaza loan, improving immediate liquidity.
• Another Loan Extension: FREIT extended the loan for its Middletown, NY apartment building for three years (until December 2027) at a fixed interest rate of 6.05%.
• Unresolved Debt Situation: A significant $25 million mortgage on FREIT's Preakness Shopping Center matured on August 1, 2025. While FREIT secured short extensions, a final agreement for modification or extension remains under negotiation. Management expects a favorable resolution.
• Management Structure: The executive officers (CEO, President, Chairman, CFO, Secretary) remain in place. Hekemian & Co. continues as FREIT's managing agent, with their agreement renewed until October 31, 2027.

5. Financial Health

FREIT's financial health in FY2025 was heavily influenced by its active debt management.

• Debt Reduction: The $5.7 million reduction on the Westwood Plaza loan is a positive step, bringing that specific loan to $10 million.
• Current Debt Snapshot (as of October 31, 2025):
  • Westwood Plaza: $10 million (extended to May 2026)
  • Middletown Apartment Building: Approximately $13.9 million (extended to December 2027)
  • Preakness Shopping Center: $25 million (matured August 2025, currently under negotiation for extension).
• Improved Cash Position: The $704,983 escrow refund directly boosted cash on hand. The $705,000 annual debt service savings from the Westwood loan modification will enhance future operating cash flow and liquidity.

6. Future Outlook

FREIT broadly states its long-term plan as seeking new real estate investments that align with its portfolio, generate income, and increase overall value, while also strategically selling underperforming assets. For the immediate future, the successful extension of the $25 million Preakness Shopping Center loan is a critical, yet uncertain, expectation.

7. Competitive Position

FREIT operates with a mixed portfolio in specific geographic markets. Its strategy of long-term holding and strategic sales is common.

This overview highlights FREIT's current portfolio, recent debt management successes, and the critical ongoing negotiation for the Preakness Shopping Center loan. Investors should consider these factors when evaluating FREIT.